Tacon asks Gary Jennison why he thinks now is the time to
enter the non-prime lending arena.
Gary Jennison is under no illusions as to the current state of
affairs in motor finance.
“When word got out that I was planning to
go back into motor finance, a lot of people phoned me up and said,
‘you’re mad’,” he recalls.
As CEO of newly-launched non-prime point-of-sale
lender Moneyway (see Concern point-of-sale PPI ban will remove
debtors’ ‘safety net’), Jennison is entering a market that
many other players have recently exited. Why?
“I believe in doing the unexpected, and honestly
believe that now is a good time to set up a motor finance company.
The industry needs a new lender,” he says.
Jennison last worked in the motor finance industry
10 years ago, latterly for GE Capital, but left, disillusioned by
the swing in the balance of power towards dealers.
“Commissions and rate competition had got way out
of hand, with dealers taking far too much of the profit
opportunity, but now the pendulum is swinging back towards a more
balanced share of the rewards,” he opines.
Moneyway is backed by the Arbuthnot group’s West
Midlands-based retail bank, Secure Trust Bank, and has access to a
good amount of funds from retail deposits, Jennison says.
“We went to the market to attract retail funding,
and got back 10 times as much as we had anticipated,” he adds. “We
have three times as much in consumer deposits as in loans, so we
are very liquid, with a Tier One capital ratio of 22 per cent” – a
figure which larger bank-owned rivals must eye with envy.
Moneyway’s aim is to target non-prime borrowers –
people who have slightly impaired credit, but who are by no means
subprime. This is much the same customer base that Blue Motor
Finance targeted before it ceased originating business, and Chris
Jones of Blue has come on board the new venture as head of motor
“We liked the business model Blue had. With the
backing of Secure Trust, we are in no danger of running out of
funds to lend,” Jennison says.
The first cars financed through Moneyway have
already been delivered to customers, despite the fact that the
decision to set up a motor finance provider was only taken in
November. A web-based dealer interface system and a bespoke
scorecard are in place.
“As a smaller player, we can be nimble and
flexible. We spotted a gap in the market and decided to fill it,”
Back-office systems – HR, IT, marketing and
business development – are taken care of by the parent group’s
larger resource, massively reducing the start-up’s costs.
All cars are funded through hire purchase, with
underwriting carried out both manually and automatically. After the
initial automatic scoring and filtering process, those applications
which are neither accepted nor declined automatically undergo a
manual intervention, with around a quarter handled in this
Unlike certain of its rivals, past and present,
Moneyway does not promise 15 minute turnaround times for credit
“That was never sensible. A couple of hours is much
more reasonable, and the kind of dealer that we want to work with
will know and understand that,” Jennison says.
Sensible growth plans
Moneyway aims to start small – “we’re
starting by lending a few hundred thousand a month” – and to grow
sensibly, with monthly volumes of £4 million to £5 million expected
by the end of 2009, and £10 million by the end of 2010. Customers’
needs will remain at the heart of Moneyway’s lending philosophy,
Jennison states: “Secure Trust Bank has operated in the
blue-collar, working class customer segment for 57 years, so this
is a market we understand.”
The types of vehicles Moneyway will look to fund
are not prestige models, but are instead family and saloon
vehicles, “where there is a massive gap in the market just begging
to be filled,” in Jennison’s view.
The initial response from dealers has been
enthusiastic, but Moneyway is selective about its partners.
“We’re looking for enduring relationships, and
we’ve already rejected a lot of enquiries because the fit isn’t
right. We’re in this for the long-term and we’re not going to be a
crutch for dealerships wanting to bump a few sales up,” says
Jennison. “We’re coming in at a difficult time for the industry but
have enough experience in this sector to make it work.”